Unit root testing with slowly varying trends

DOI10.1111/JTSA.12557MaRDI QIDQ4997689zbMATH OpenOpenAlexFDO

Authors Sven Otto

Publication date 30 June 2021

Published in Journal of Time Series Analysis (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/2003.04066

zbMATH Keywords

heteroskedasticitynonlinear trendsunit root tests

Mathematics Subject Classification ID

Non-Markovian processes: hypothesis testing (62M07) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Monte Carlo methods (65C05)

Abstract: A unit root test is proposed for time series with a general nonlinear deterministic trend component. It is shown that asymptotically the pooled OLS estimator of overlapping blocks filters out any trend component that satisfies some Lipschitz condition. Under both fixed-$b$ and small-$b$ block asymptotics, the limiting distribution of the t-statistic for the unit root hypothesis is derived. Nuisance parameter corrections provide heteroskedasticity-robust tests, and serial correlation is accounted for by pre-whitening. A Monte Carlo study that considers slowly varying trends yields both good size and improved power results for the proposed tests when compared to conventional unit root tests.

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Cited in

(10)

• On unit root testing with smooth transitions
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• TESTING FOR TREND
• Unit root testing in multiple smooth break models with nonlinear dynamics
• Testing stationarity and trend stationarity against the unit root hypothesis

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